10/14/08

Mr President take it seriously; Uganda is not an economic saint

Fredrick Masiga

Now that the world is finally recognising that a global economic recession has set in, we must start to plan how best to save ourselves as the infection spreads and by the way, no one knows how long it will last.

At Kololo Airstrip last week, President Y.K. Museveni painted a less gloomy picture for Uganda even as alarm bells started going off in neighbouring Kenya (trading on the Nairobi Stock Exchange was suspended for 15 minutes the second time since January) where prices slid on the back of investor panic.

Whoever takes the suspension as a one off should seriously think twice because the long term and more disastrous impact of the recession is still a long way off but its next stop is definitely in Africa and the rest of the developing world. The "don't panic" counsel offered by Museveni should be taken with the foresight to start doing things differently for the future.

It is not a question of whether our financial systems are strong and sound or lack of it, nor is it about having prudent lending procedures. These are important factors though. The negative impact of the global financial crisis on a cash economy like Uganda will strike elsewhere: - primary production (agriculture), exports, exchange rate, jobs, aid funding, remittances and encourage capital flight among others.

Prices of primary products such as coffee, fish, tea and others will plummet as consumer countries mainly the disaster hit Europe, Asia and America will demand less for lack of purchasing power. The Shilling could depreciate – a trend that could support exports – but we could still fail to earn as much because of low prices in the international market.

The belief that the current high food prices should benefit the farming rural population in Uganda is erroneous. It is not entirely true Mr President that our farmers have the capacity to take advantage of the situation. Actually, most rural dwellers hardly have enough food support themselves. Majority of these are subsistence survivors. The most they make from their harvests is to sell some of it in community markets – they have done that for ages.

They cannot significantly profit from the rising prices because there is no intent for commercialisation on the onset of their products. The agricultural policies at hand lack the critical ingredient to transform the rural peasantry's mentality and physical capacity into an entrepreneurial farming community; the kind that would take advantage of the rising prices.

Basic requirements such as farming tools are still rudimentary, credit for agriculture is a stalled debate, improvement of rural transport infrastructure has remained a song and the current debate on land is likely to stifle any effort to amalgamate land for commercialised agricultural purposes.

There is no country in the world that has transformed itself into a major global economic player without the initial impetus from its primary economic activity. Despite its strength, the US still has a powerful cotton sector and Japan depended on fishing.

Uganda's agriculture has largely remained in the periphery. If all the rosy figures about the growth of private investments, again largely foreign dwindle, we have nothing to lean on. And it is they, not agriculture that are also the highest contributors to revenue growth and offer quality employment.

Uganda needs an agricultural policy that would support a three-dimensional front; support for rural domestic farming with intent to commercialise, offer conducive inducement for the private sector to engage in commercial agriculture and finally, government must engage in agriculture for strategic reasons.

The private sector is generally risk averse on agriculture and yet, with government's direct involvement there would be leverage for private player confidence. And let's not forget the global recession also means that foreign credit to private investors could dry up or come more expensively. Over to you Mr President!